Casino license competitors have strengths, weaknesses

Steve Kilar, The Baltimore Sun

Although Maryland has handed out five casino operating licenses, the state is entering uncharted territory with the allocation of its sixth.

For the first time, there's real competition. Three serious operators submitted bids to run a casino in Prince George's County, making the choice more competitive than the selections for other jurisdictions.

"We're going to have to figure out how we do a fair evaluation," said Donald Fry, chairman of the state commission that will select the winner. "It does present a different dynamic than what we had previously done."

The three bidders seem prepared to fiercely defend their applications, submitted just over a week ago to Maryland's gaming agency. The winner is expected to be chosen by the end of the year, and the new casino would be licensed to open in 2016.

Although MGM Resorts International helped push for voter approval of a sixth casino in the state, is partnered with the prominent National Harbor development and is endorsed by Prince George's County Executive Rushern L. Baker III, there does not seem to be a clear front-runner. The other bidders are Penn National Gaming Inc., a casino and racetrack operator already present in Maryland, and Greenwood Racing Inc., the owner of one casino — Pennsylvania's most successful.

"It's very positive for Maryland casinos in general that you've got three strong operators bidding on this," said James Karmel, a gambling industry analyst and history professor at Harford Community College. Interest among major players in the state's last license demonstrates that the market remains desirable, he said, even though several casinos in Maryland are up and running.

The competitors' proposals have significant overlap. All are suggesting resort-style facilities with overnight accommodations, a range of dining options, ample parking, entertainment venues and hundreds of slot machines and table games.

Each facility would cost hundreds of millions of dollars and is planned for a small section of the county, near where the Capital Beltway crosses the Potomac River.

Each is expected to bring thousands of jobs, during construction and once the casino opens. MGM's is expected to create 4,000 jobs at the casino and to spur other area businesses to hire an added 4,400 people. Penn National projects 2,600 direct and incidental permanent jobs. Greenwood's projection falls in between.

"You want to look at total investment, the revenue picture and the overall impact on development and employment" when determining which proposal would best serve Maryland, said David G. Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas.

The size of the facility and its level of amenities will bear significantly on the casino's economic impact, Schwartz said.

"Hypothetically, you could have a tent with a lot of slot machines" produce as much gambling revenue as a well-appointed resort, but the job creation and economic multiplier effects would be far lower, he said.

The amenities of each proposed casino cannot be compared yet. The applications are not public documents, and the competitors have been reluctant to provide details because of disclosure restrictions put on them by the state. All three bidders declined to provide revenue projections.

Maryland's gambling law also dictates the factors that the commission must consider when evaluating the proposals. The most weight — 70 percent of the decision — is supposed to be given to "business and market factors," including the amount of tax revenue each proposal expects to generate, the number of jobs created and compliance with minority business participation goals.

The expected wages and benefits for the jobs created by the facility and "additional economic development planned" in the area of the proposed facility, according to the state's request for applications, are supposed to be 15 percent of the decision.

The remaining 15 percent is supposed to be attributed to the need for new public infrastructure around the site, the existing transportation infrastructure nearby and the effect the casino would have on nearby residential communities.

The commission still needs to work out how the factors' weight will be put into practice, Fry said. Until now, the distribution of Maryland's casino licenses has not been competitive, he said.

Regardless of what the selection process looks like, the decision will boil down to the commission asking which proposal is "in the best interest of the state," Fry said.

Despite the similarities among the proposals and the lack of details available to the public, the casino operators identified attributes that they said sets their plan apart.

MGM's proposed location is its main strength, said Lorenzo Creighton, president and chief operating officer of MGM National Harbor LLC, the MGM subsidiary that proposed a site beside the Capital Beltway and near the existing National Harbor conference center, retail and shopping destination on the Potomac River.

The proposed casino site is beside Washington's Beltway, near its connection with Interstate 295. Much of the area's highway infrastructure was built within the past few years.

"We're going to benefit from that infrastructure," Creighton said, mainly because it will be easy for customers to reach the property.

Other factors Creighton sees in MGM's favor are the company's commitment to diversity — a plus when the commission is looking at minority hiring — and its size. MGM is an entertainment powerhouse, he said, that would be able to bring big names to its casino.

Plus, it has a vast database of players around the world, he said. MGM owns significant brands that have global recognition, including Bellagio and Mandalay Bay, and is based in Nevada.

"We will be able to leverage the ... Players Club program to draw tourists to National Harbor," Creighton said.

The major selling point of Penn National's proposed casino, which would be located at Rosecroft Raceway, just off the Capital Beltway a few miles east of the Potomac, is its connection to harness racing, said Karen Bailey, vice president of public affairs for Penn National.

"The original intent of slots in Maryland was to help sustain and save the horse racing industry and all of the jobs that go along with it," Bailey said.

Penn National purchased Rosecroft two years ago out of bankruptcy. Last summer, the company signed a contract with the Cloverleaf Standardbred Owners Association that would end racing at the track if a casino license in Prince George's County were granted to another bidder.

Penn National also has significant experience within the region, Bailey said. The company runs the Hollywood Casino Perryville in Cecil County and operates a Hollywood casino and racetrack in Charles Town, W.Va., that draws from the Washington market. If it were to win the Prince George's license, the casino would operate under the Hollywood name.

"MGM does not have the regional gaming operations we do, and Greenwood ... does not have the same breadth of experience that we do," Bailey said.

Although Penn National's application proposed just 500 slot machines at Rosecroft — far fewer than the 4,750 proposed by Greenwood and the 3,600 MGM wants — that number would be increased to 3,000 if Penn National were awarded the license, Bailey said.

Fry said the licensing commission would "look at the proposals that are submitted" and not at the applicants' intentions. But he said the proposals may be revised if authorized by the commissioners.

Greenwood, the only private company in the competition, emerged as a surprise bidder May 10 but does not see itself as a dark horse. It is succeeding in the Philadelphia market, which has a high tax rate on casino gambling like Maryland, even though its Parx Casino is close to Atlantic City, N.J., where operators pay a fraction of the taxes, said Bob Green, Greenwood's chairman.

"Every year, our market share of the East Coast market increases and theirs declines," Green said of Greenwood's casino, which opened in late 2006 and was formerly known as Philadelphia Park Casino and Racetrack.

Maryland and Pennsylvania tax slot machines at a rate above 50 percent. In Nevada and New Jersey, the rate is under 10 percent.

Another advantage for Greenwood is that the site selected for its proposed Prince George's casino, which also would operate under the Parx name, is similar to its Pennsylvania property, Green said.

Greenwood's casino is just off the Pennsylvania Turnpike, about 20 miles north of downtown Philadelphia. The site the company selected in Maryland is three miles south of the Capital Beltway on Indian Head Highway, about 15 miles from the National Mall.

"It literally felt like deja vu when we went down there," said Tony Ricci, Greenwood's CEO.

Greenwood's casino, moreover, would have a larger economic impact than its competitors, Ricci said.

More new development would take place around the Parx site than around MGM's or Penn National's proposed locations, which are in built-up areas, he said. And Greenwood's site would be integrated with the economies of the surrounding communities, he said, unlike National Harbor, which he sees mainly as a destination for tourists.

"They're a very serious competitor by way of the track record they've established," Karmel said of Greenwood. Even so, he said, he sees MGM's location and Penn National's connection to horse racing as potentially persuasive to the committee.

The depth of the competitors' existing customer databases is not likely to have a significant effect on their abilities to market the facility, Schwartz said. Players who live in or are visiting Washington and regularly play at MGM or Penn National casinos might be more likely to gamble in Prince George's County if they can earn customer rewards points, he said, but most of the casino's business, whoever runs it, will come from the Washington region.

There's no incentive to bring their players from lower-tax jurisdictions to Maryland, he said.

"You're going to make your money from the Greater D.C. area, and that is a very large and affluent population," Karmel said. "That is enough to make the casino very lucrative."